The deal should be worth around $350 million, according to estimates by agribusiness consultant Veeries based on a market valuation of around $50 per ton of cane processing capacity.
"They might have paid a premium, possibly, because those were good quality assets," said Fabio Meneghin, a Veeries partner.
COFCO's advance in the Brazilian sugar business coincides with Raizen recently starting a restructuring and selling units.
Bunge has no interest in the sugar business, the consultants said, having sold mills to BP Plc in the past. The two units it is selling currently were added to its portfolio as a result of its merger with Viterra.
Deal adds Rio Vermelho and Nova Unialco mills
COFCO, the agricultural business platform for COFCO Corp, China's largest food company, said it is acquiring the Rio Vermelho and Nova Unialco mills in Sao Paulo state, Brazil's main sugar belt. The two units have a combined capacity to process 7 million metric tons of sugarcane per year.
The company already owned four mills in the country and with the acquisition it should elevate total cane processing in Brazil to around 25 million tons, joining the group of the four biggest along with Raizen, Atvos and BP Bioenergia.
"This deal is very strategic for COFCO," said Willian Orzari Hernandes, a partner at sugar industry advisory firm FG/A, adding the mills in the deal have a high capacity to produce sugar.
They should add around 700,000 tons to COFCO's sugar production in Brazil, which should increase to around 2.2 million tons, he estimated.
"It will be closer to the volume China imports, so with the deal the Chinese secure their sugar needs for the coming years," Orzari said.
COFCO expands Brazilian sugar capacity with Bunge mills
Chinese commodities trader COFCO International closed a deal to buy two mills from food processor and crop merchant Bunge Global to sharply expand its sugar operations in Brazil, the world's top producer and exporter of the sweetener.
The deal comes at a time when sugar prices are starting to recover from a long period below the cost of production as the threat of El Nino to global output drove funds to buy sugar futures aggressively in recent weeks.
The deal was announced by the two companies in separate statements on Tuesday that did not include financial terms.
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